An Introduction to Integrated Enterprise Information Systems
Review Questions
R1. What does it mean to have a stovepiped enterprise?
In a stovepiped enterprise, each functional area is relatively isolated from the other functional areas and decisions may be made without a realization of how they may affect the other functional areas. The isolation of functional areas need not be physical; two departments that are physically located on the same floor of the same building may not fully understand each other’s operations and objectives, nor how they fit together within the broad scope of the enterprise.
R2. What does it mean to have stovepiped systems?
In a stovepiped system, data and processes within each system or software application are relatively isolated from each other and data is typically stored separately in each. Changes made in one system to data that is also stored in other systems do not get made in the others. Redundancy leads to inconsistency and to poor decision support.
R3. What are some impediments enterprises may encounter in their efforts to integrate their information systems?
Resistance to change is the main impediment enterprises will face. Integration is likely to require at least some of the people in the enterprise to learn a new software application because of the need to switch to a common set of building blocks. If new software is not available or cannot be implemented, then impediments may include differences in operating systems, the need to build bridges between the existing systems, cost, and so forth.
R4. What does the phrase “paving the cowpaths” mean with respect to re-engineering?
Hammer describes paving the cowpaths as the embedding of outdated processes in silicon and software. That is, enterprises simply use technology to seed up existing processes without considering whether the processes themselves need to be changed.
R5. What are three common types of integration attempts currently used by enterprises?
One common type of integration in enterprise systems is the manual transfer of information from one system into another, e.g. printing the data from one system and re-keying it into the other, or downloading it into a generic format from the one system and uploading it into the other system.
A second common type of integration in enterprise systems is the automated transfer of information from one system into another via the use of program code that forms bridges between the disparate systems. This approach is similar to the manual download and upload of information from one system to the other. Best of breed software is an example of this type of integration.
A third common type of integration in enterprise systems is the use of single source ERP solutions. Even the use of a sole ERP software package is somewhat similar to the automated transfer of information from one system into another; most ERP systems are made up of separate modules with program code that forms bridges between them.
A less common but more desirable form of integration in enterprise systems is the use of a common building block for all parts of the system.
Discussion Questions
D1. What are the different degrees to which an information system may be integrated, and what are the pros and cons to each approach?
Information systems may have no inherent integration. In such cases one must either collect the same data in each separate system, or one must devise a mechanism by which information may be transferred from one system into the other, e.g. printing the data from one system and re-keying it into the other, or downloading it into a generic format from the one system and uploading it into the other system.
Pros – each separate system has ownership of the data for the decisions needed in its functional area; system structure consistent with the silos of actual business the system represents
Cons – redundant data is stored and will lead to data inconsistency; wasted storage space and duplication of efforts; extra manual effort is required, either to collect data in an area even though another area is also collecting it, or to transfer the data from one system to another
Information systems may use program code to form bridges between disparate systems by which information may be automatically transferred.
Pros – each separate system has ownership of the data for the decisions needed in its functional area; system structure consistent with the silos of actual business the system represents
Cons – redundant data is stored and will lead to data inconsistency; wasted storage space and duplication of efforts
Information systems may be integrated via the use of a single source ERP solution. Even the use of a sole ERP software package is somewhat similar to the automated transfer of information from one system into another; most ERP systems are made up of separate modules with program code that forms bridges between them.
Pros – data redundancy is reduced or eliminated
Cons – confusion exists as to data ownership
Information systems may be intergrated via the use of a common building block for all parts of the system. This is the goal of ERP systems; however, ERP systems more closely resemble the best of breed approach.
Pros – data redundancy is reduced or eliminated
Cons – confusion exists as to data ownership
D2. Explain the statement “Stovepiped operations lead to stovepiped systems; stovepiped systems perpetuate stovepiped operations.”
Because decision-making in stovepiped operations is typically based on decisions within a particular silo, the need for integration of information across functional areas is often obscured. People will be unwilling to change an information system unless a strong need is identified for the change. Stovepiped operations are unlikely to highlight such needs.
When decision-making is based on information obtained from within one functional area, those decisions are likely to be made from a narrow perspective. If systems are not integrated, it is unlikely that decision-makers will obtain information from multiple areas, because that would require obtaining information from multiple systems. If decisions are not based on integrated information, then enterprises may not realize the advantages that such information may provide. Thus if the system is stovepiped, there will be inadequate support for integrated operations.
D3. Read Hammer’s article on reengineering. Is reengineering the same as automating or computerizing traditional methods of conducting business? Explain.
Automation implies replicating or replacing traditional processes using computer hardware and software. The essence of what you do does not change; you simply changed the resources used to perform work. As stated in Hammer’s article,
... heavy investments in information technology have delivered disappointing results — largely because companies tend to use technology to merchandize old ways of doing business. They leave the existing processes intact and use computers simply to speed them up.
It is time to stop paving the cow paths. Instead of embedding outdated processes in silicon and software, we should obliterate them and start over. We should “reengineer” our businesses: use the power of modern information technology to radically redesign our business processes in order to achieve dramatic improvements in their performance.
D4. Suppose you wanted to implement REA enterprise ontology concepts when you enter the workplace. What obstacles and challenges are you likely to face?
Lack of systems knowledge, resistance to change, and an unwillingness to acknowledge the need for changes, will challenge the profession as it strives to re-invent itself in today’s dynamic business world. Do not assume that all accountants are convinced that there is a need to change. Even if they are receptive to discussing updates to accounting, they may desire alternatives that retain the traditional accounting process.
Some people will choose not to change from the traditional architecture. They may feel a change in the accounting architecture will reduce an organization’s ability to adhere to GAAP (generally accepted accounting principles). It is important to remember that GAAP addresses the way financial statement information is reported. GAAP does not deal with or mandate the method of data collection, storage, or processing. Still others view the clerical procedures of classifying and recording a journal entry, posting to a ledger, and generating a trial balance as an integral part of accounting. Such a perspective emphasizes the how of accounting rather than the why of accounting. It is important to remember that the traditional general ledger accounting cycle process has lasted many years and people are not quick to replace it with any alternative that is different and new. Accountants and many other business people learned accounting using debits, credit, journals, ledgers, and posting, and some people can not envision accounting without these features.
D5. Would you describe the REA enterprise ontology as used for accounting systems as automating traditional methods of accounting or as re-engineering accounting methods? Why?
The REA enterprise ontology is a re-engineering of accounting methods. In developing REA, McCarthy did not start from the old way accounting was done and simply automate or tweak it. Instead, he started with a clean slate, observed the substance of hundreds of accounting transactions and discovered the pattern inherent in them. He obliterated concepts such as debits and credits that are considered key constructs in traditional accounting methods.
Applied Learning
A1. Re-engineering the BusinessSchool. This chapter included discussions of functional silos or stovepipes in business and the need to re-engineer business processes and information systems to better share information across functions. Consider your college or university’s business school.
Required:
a. Describe the structure of your business school (e.g. what departments or other subdivisions exist within the business school; who is in charge of those areas; where are faculty offices located for each department or subdivision; to what extent do faculty members from different departments or other subdivisions co-author research and/or team teach; how many business courses are team-taught; does anything about the structure of your business school seem remarkable)
b.Based on your description in part (a), to what extent do you think functional silos are present in your college or university’s business school?
c. How does the presence (or absence) of stovepipes in the form of the business school affect your curriculum?
d. Do you have any recommendations as to how your business school could be re-engineered? Explain.
Student answers will vary considerably depending on what courses are included in their university’s curriculums, their opinions as to how the extent to which stovepiping or lack thereof affects their curriculum, and on their creativity in recommending possible re-engineering solutions. One possible re-engineering solution is to divide the curriculum along business process/transaction cycle lines instead of departmental lines. For example, offer tracks of courses (i.e., majors) that focus on the sales/collection process, the acquisition/payment process, the conversion process, the human resource process, and the financing process. Courses that teach material pertinent to all transaction cycles could be required of all majors. Courses in the sales/collection major would be similar to courses in today’s marketing major, but they would include many other perspectives and address all aspects of the sales/collection process and the links between that process and the neighboring processes in the value chain. Courses in the acquisition/payment, conversion, and human resource process majors would be similar to courses in the various specialty areas of today’s management major. Courses in the financing process major would be similar to those taken by finance majors today, with added focus on the links the financing process has to other transaction cycles.
A2. Management Mis-Information Systems.
Five assumptions people typically make about information systems are summarized below. The author, Russell L. Ackoff,[1] contends these are erroneous assumptions and identifies reasons why he feels they are in error. The objective of this assignment is to help you to begin to identify factors that distinguish good information systems from bad information systems.
Assumption 1 -- Give Them More
Most MIS’s are designed on the assumption that the critical deficiency under which most managers operate is the lack of relevant information. I do not deny that most managers lack a good deal of information that they should have, but I do deny that this is the most important informational deficiency from which they suffer. It seems to me that they suffer more from an over abundance of irrelevant information.
This is not a play on words. The consequences of changing the emphasis of an MIS from supplying relevant information to eliminating irrelevant information is considerable. If one is preoccupied with supplying relevant information, attention is almost exclusively given to the generation, storage, and retrieval of information: hence emphasis is placed on constructing data banks, coding, indexing, updating files, access languages, and so on. The ideal which has emerged from this orientation is an infinite pool of data into which a manager can reach to pull out any information he wants. If, on the other hand, one sees the manager’s information problem primarily, but not exclusively, as one that arises out of an overabundance of irrelevant information, most of which was not asked for, then the two most important functions of an information system become filtration (or evaluation) and condensation. The literature on MIS’s seldom refers to these functions let alone considers how to carry them out.
My experience indicates that most managers receive much more data (if not information) than they can possibly absorb even if they spend all of their time trying to do so. Hence they already suffer from an information overload. They must spend a great deal of time separating the relevant documents. For example, I have found that I receive an average of forty-three hours of unsolicited reading material each week. The solicited material is usually half again this amount.
I have seen a daily stock status report that consists of approximately six hundred pages of computer printout. The report is circulated daily across managers’ desks. I’ve also seen requests for major capital expenditures that come in book size, several of which are distributed to managers each week. It is not uncommon for many managers to receive an average of one journal a day or more. One could go on and on.
Unless the information overload to which managers are subjected is reduced, any additional information made available by an MIS cannot be expected to be used effectively.
Even relevant documents have too much redundancy. Most documents can be considerably condensed without loss of content. My point here is best made, perhaps, by describing briefly an experiment that a few of my colleagues and I conducted on the Operations Research (OR) literature several years ago. By using a panel of wellknown experts we identified four OR articles that all members of the panel considered to be “above average,” and four articles that were considered to be “below average.” The authors of the eight articles were asked to prepare “objective” examinations (duration thirty minutes) plus answers for graduate students who were to be assigned the articles for reading. (The authors were not informed about the experiment.) Then several experienced writers were asked to reduce each article to 2/3 and 1/3 of its original length only by eliminating words. They also prepared a brief abstract of each article. Those who did the condensing did not see the examinations to be given to the students.
A group of graduate students who had not previously read the articles were then selected. Each one was given four articles randomly selected, each of which was in one of its four versions: 100%, 67%, 33%, or abstract. Each version of each article was read by two students. All were given the same examinations. The average scores on the examinations were compared.
For the aboveaverage articles there was no significant difference between average test scores for the 100%, 67%, and 33% versions, but there was a significant decrease in average test scores for those who had read only the abstract. For the belowaverage articles there was no difference in average test scores among those who had read the 100%, 67%, and 33% versions, but there was a significant increase in average test scores of those who had read only the abstract.
The sample used was obviously too small for general conclusions but the results strongly indicate the extent to which even good writing can be condensed without loss of information. I refrain from drawing the obvious conclusions about bad writing.
It seems clear that condensation as well as filtration, performed mechanically or otherwise, should be an essential part of an MIS, and that such a system should be capable of handling much, if not all, of the unsolicited as well as solicited information that a manager receives.
Assumption 2 -- The Manager Needs The Information That He Wants
Most MIS designers “determine” what information is needed by asking managers what information they would like to have. This is based on the assumption that managers know what information they need and want it.